This Move By Lawmakers Could Reduce Select Social Security Benefits By 19%

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from FoxBusiness,

The 114th Congress has been in session for less than a week and we already have a major piece of legislation introduced in the House of Representative that could have a lasting effect on millions of Americans.

Lawmakers take aim at Social Security
On Tuesday the Republican-led House of Representatives approved a rule that would deny a payroll tax reallocation from the Old-Age and Survivors Insurance Trust Fund (OASI), which divvies out benefits to retired workers and survivors of deceased workers, to the Social Security Disability Insurance Trust Fund (DI). The House would, however, approve a reallocation as long as it is accompanied by benefit cuts or tax increases that improve the solvency of the OASI and DI.

Since 1968, according to Kathy Ruffing at the Center of Budget and Policy Priorities, there have been 11 reallocations of payroll taxes to help whichever fund was running short on reserves. However, in this instance denying to redirect payroll taxes from the OASI to the DI will likely result in the Disability Insurance Trust Fund running out of reserve cash by next year. If this were to occur without any changes being made to the current payroll tax allocations those who receive Social Security disability benefits will see their benefits automatically fall by 19%. With an average family benefit for disabled workers of $1,943 as of December 2013, this means a nearly $370 monthly benefit cut if nothing is done.

Could this move stick?
You might wonder, “Why this sudden crisis?” A number of factors are at play here.

To start with, the rapidly growing retirement of baby boomers means more and more people are claiming retiree benefits and not enough young workers are taking their place, which is increasing the outflow of funds from the OASI. People are also living longer than ever before, meaning the OASI will be paying Americans for an even longer period of time. With this in mind a majority of lawmakers in the House of Representative presumably believe it’d be wrong to allocate additional funds away from this significantly larger group of beneficiaries.

However, the likelihood of this move sticking may not be as high as you’d think, even with a Republican-led Congress.

Three popular fixes
While it remains to be seen what lawmakers will eventually propose to provide a long-term solution to fix the Social Security system, the American public has spoken in recent survey from The Washington Post and offered its two cents on how to fix the system.

Coming in dead last was the idea of doing nothing and simply raising taxes or cutting benefits for the next generation once the reserve funds run out. The American public realizes that changes need to be made sooner rather than later, and that doing nothing isn’t the correct course of action. It’s more evidence that the House of Representative’s early actions are unlikely to stick.

Instead, respondents offered their three most popular ideas to fix Social Security:

– Raise the earnings cap
– Raise the full retirement age
– Change the cost-of-living adjustment

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